Euro sags on Draghi's caution, dollar brushes off Trump's tariffs

    * ECB's Draghi raises caution on inflation, protectionism
    * Trump grants tariff exemption to Mexico, Canada amid NAFTA
talks
    * Traders await BOJ policy meeting, U.S. payrolls data 

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, March 8 (Reuters) - The euro fell on Thursday as
European Central Bank President Mario Draghi, while
acknowledging faster growth in Europe, said regional inflation
remained subdued and rising protectionism is a risk.
    The dollar strengthened on the euro's weakness and held onto
its gains as U.S. President Donald Trump signed a version of the
steel and aluminum tariffs, which was not as severe as some
traders had feared and less likely to trigger a global trade
war.
    Draghi expressed his view on these issues at his news
conference after a central bank policy meeting. It overshadowed
the ECB's dropping of a long-standing pledge to increase its
bond purchases if needed, a move that briefly spurred buying of
the single currency.
    "All of which sent the euro yo-yoing as the markets ponder
the very real threat of a trade war between the U.S. and the
EU," said David Lamb, head of dealing at FEXCO Corporate
Payments in Edinburgh.
    Draghi's comment on protectionism came as traders had been
awaiting on details on Trump's proposed tariffs, which has
whipped up investor angst and outcry from U.S. trade partners.
    Trump's proclamation imposed a 25 percent levy on steel and
a 10 percent tariff on aluminum. It allowed an exemption to
Canada and Mexico amid current negotiations on the North
American Free Trade Agreement. There is also a possibility of
alternatives for other nations.
    Trump promised earlier on Thursday to show great flexibility
and cooperation toward the United States' "real friends." 
    
    DRAGHI OVER TRUMP 
    The dollar, which is seen a safe haven on trade war fears,
had dipped on prospects for a softening stance on the tariffs
before gaining on perceived dovish remarks from Draghi.
    "It's more Draghi-driven than Trump-driven," Boris
Schlossberg, managing director of FX strategy with BK Asset
Management in New York said of the dollar.
    The greenback had weakened following the resignation on
Tuesday of Gary Cohn, Trump's top economic adviser, who was seen
as a bulwark against protectionism in the White House.
    The index, which tracks the greenback versus a basket
of six currencies, rose 0.489 point or 0.55 percent, to 90.126.
    The euro was last down 0.81 percent, at $1.2311.
    The Canadian dollar was up 0.12 percent, at
C$1.2893.
    The Mexico peso was up 0.33 percent, at 18.6500
peso per dollar. 
    With the ECB and Trump's tariffs in the rear-view mirror,
traders await news from the Bank of Japan's policy meeting and
the U.S. government's payrolls report for February.
    "We think that they will not make any changes. Inflation is
ticking higher but under their target," said John Doyle, vice
president of dealing and trading at Tempus Inc in Washington.
    On Tuesday, Bank of Japan Governor Haruhiko Kuroda said a
future exit of its ultra-loose monetary policy would need to be
"very gradual," tempering his remarks before lawmakers that the
central bank would consider an exit if his inflation target were
reached in fiscal 2019.
    Analysts forecast a solid U.S. jobs report for February, due
at 8:30 a.m. EST (1350 GMT) on Friday, which would support the
view the Federal Reserve would raise interest rates later this
month.
    The dollar was last up 0.15 percent, at 106.22 yen,
while the euro was down 0.64 percent, at 130.79 yen.
========================================================
    Currency bid prices at 4:19PM (2119 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.2311        $1.2412     -0.81%         +2.63%      +1.2446     +1.2299
 Dollar/Yen       JPY=        106.2400       106.0600    +0.17%         -5.71%      +106.3100   +105.9000
 Euro/Yen         EURJPY=     130.79         131.63      -0.64%         -3.25%      +131.9700   +130.5300
 Dollar/Swiss     CHF=        0.9509         0.9433      +0.81%         -2.40%      +0.9519     +0.9422
 Sterling/Dollar  GBP=        1.3812         1.3899      -0.63%         +2.22%      +1.3909     +1.3782
 Dollar/Canadian  CAD=        1.2895         1.2910      -0.12%         +2.53%      +1.2960     +1.2867
 Australian/Doll  AUD=        0.7787         0.7823      -0.46%         -0.18%      +0.7838     +0.7773
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1709         1.1706      +0.03%         +0.17%      +1.1740     +1.1684
 Euro/Sterling    EURGBP=     0.8910         0.8926      -0.18%         +0.30%      +0.8957     +0.8906
 NZ Dollar/Dolar  NZD=        0.7259         0.7283      -0.33%         +2.44%      +0.7296     +0.7246
 Dollar/Norway    NOK=        7.8372         7.8073      +0.38%         -4.51%      +7.8604     +7.7991
 Euro/Norway      EURNOK=     9.6472         9.6916      -0.46%         -2.05%      +9.7288     +9.6391
 Dollar/Sweden    SEK=        8.2629         8.2286      -0.37%         +0.75%      +8.2766     +8.2145
 Euro/Sweden      EURSEK=     10.1742        10.2116     -0.37%         +3.41%      +10.2345    +10.1700
        
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 (Additional reporting by Tommy Wilkes, Saikat Chatterjee;
editing by Jonathan Oatis and Lisa Shumaker)